Consider the following story: A Midwestern couple who lives in a small town pays nearly $1,150 per year for insurance on their two cars. They don't drive far to work, haven't had any accidents or received any speeding tickets, and they own their own home, so they're a good risk.

They think $1,150 per year isn't too much to spend — it's on par with what their neighbors pay, and it's less than they paid when they lived in a larger city. They have an agent, but they haven't seen or spoken to her in years, and if they do have an accident, they are supposed to call a toll-free number, not the agent.

Then they see an ad for Progressive Insurance. They call the number to get its price and the price of three competing insurance companies. (Here's where the story gets a little unbelievable.) For the exact same coverage, Progressive offers them insurance for $385 per year, a savings of $765 per year! You're thinking this is a made-up story, right? Nope — all true.

This scenario happened in the early 2000s, and the service and coverage has been exactly the same — maybe even better because Progressive has a 24-hour customer-service hotline that's operated seven days a week. The moral of the story is this: Shop around.

Insurance companies change their products and prices all the time. Once a year, do a quick Internet search of insurance prices, and if you find a substantially lower price, ask your current agent to requote your policy to see whether he or she can match what you've found.

Comparison Shopping

You have nothing to lose — and potentially a lot of money to gain — by contacting Progressive. Keep in mind that if you've received a lot of traffic tickets, have been in one or more accidents, live in an area that tends to produce a lot of accidents or car thefts, drive a car that's expensive to repair, or have a very long commute, your insurance payment may be quite a bit higher than the example given here.

But because Progressive gives you the insurance rate for its major competitors, you may find a non-Progressive rate that's still better than what you're paying now. Use WORKSHEET 7-1 as a handy place to compare rates and coverage.

WORKSHEET 7-1

Insurance Comparisons

Raising Your Deductibles

If your insurance payments are still uncomfortably high after you shop around, try raising your deductibles (the amount you pay out of pocket if you have an accident, your car is stolen, or a flood washes your car away). You can save quite a bit on your annual insurance costs by increasing your deductibles from $250 to $500 or from $500 to $1,000 (per incident).

Some companies don't offer high deductibles, but if yours does, see how much of a difference raising it can make. Do be sure, though, to put the amount of your deductible in a savings account so the money is there if you need to repair your car.